Medicare Settlement Conference Facilitation

HOSPITALS LOOKING FOR SOLUTIONS TO THE MEDICARE APPEALS BACKLOG CRISIS

Part III — Settlement Conference Facilitation (SCF) As a Way Out of the Medicare Backlog

This is the third part of a series covering the Medicare appeals backlog. In Part I of this series, we examined a few statistics behind the backlog. The Office of Medicare Hearings and Appeals (OMHA) does not have the capacity to handle this case load. It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals. Now it is well over one million appeals. The time it is taking to resolve appeals is more than ten times longer that the statutory framework: What is supposed to take ten months, now is taking more than 10 years! This means that for all practical purposes, the appeals system has completely crashed.

We noted that much of the appeals backlog can be explained by the use of computerized programs that automatically generate audits, and also by the astounding number of errors made by the audit contractors.

Figure 1 Audits of Healthcare Providers are Very Inaccurate. More than 2/3-rds are incorrect, but still cost a great deal to appeal.

The errors made by contractors are substantial. For example, in hospital appeals, the audit contractors are wrong 2/3-rds of the time. In other words, the audit contractors are “mostly wrong”.

We suggested that one way to cut down the number of appeals would be to use audit contractors who make mistakes only 1-2% of the time, instead of 66% of the time. This would dramatically reduce the number of appeals. Why the government tolerates contractors who are wrong most of the time is a mystery.

In Part II we examined the proposal to add a new actor in the appeals process. Attorney Adjudicators (AAs) will take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. The Attorney Adjudicator is defined as someone who is a licensed attorney “employed by OMHA having knowledge of Medicare coverage and payment laws and guidelines”. The AA’s duties would include (1) performing reviews of the administrative record; or (2) drafting appropriate orders.

Since the Attorney Adjudicator at this time is merely a proposal, it is unclear if OMHA will end up going this route. Some provider associations have objected. Although there is a logic to the Attorney Adjudicator, given the astounding and disabling backlog, it is unclear how this would help except incrementally.

In other words, AAs might help, but the backlog is so large this solution by itself would have little effect.

Bulk Settlement

Today, in Part III, we will examine the proposal for bulk settlement. Bulk settlement of appealed claims can take place through an alternative dispute resolution process called “Settlement Conference Facilitation” (SCF). It is not entirely clear how a settlement is reached, except that there is a facilitator of the mediation process. The facilitator is not an external party, but instead works for the Office of Medicare Hearings and Appeals (OMHA).

This mediation is described as a discussion of the potential for “a mutually agreeable resolution for claims appealed to the Administrative Law Judge” (ALJ). If the settlement conference is successful, then a “settlement document” is drawn up, and that is the end of the matter.

The eligibility requirements are restrictive. The amount of each claim must be $100,000 or less. If the overpayment amount is extrapolated from a universe of claims, the total amount must be $100,000 or less. At least 50 claims must be at issue, and at least $20,000 must be in controversy.

There is a well-defined process that is quite specific regarding forms and decision points, but we have been unable to identify the rules for the actual settlement conference. For example, we have seen no published set of procedures or system of logic to follow in order to reach a settlement. What is peculiar is that the actual validity of the various claims is not reviewed. What do these meetings do instead? It is not clear.

This process was piloted in 2014, and so far around 2,000 Medicare Part B ALJ appeals have been handled. In 2015 Phase II of the pilot was started, and Phase III opened in February of this year.

This program, still in its pilot stage, does not cover all appeals, only a portion of them. It is not known how many appeals are in the $20,000 to $100,000 range. This is another example of where CMS data sets are lacking. But perhaps this “price” range accounts for the bulk of the claims in the backlog.

Even if 3,000 of the cases have been handled through this alternative dispute resolution process, that would amount to less than one-third of 1% of the backlog. So, like the prospects for the Attorney Adjudicators, it is difficult to view this relatively new process as being more than a drop in the bucket insofar as cutting down the backlog is concerned.

In the final part of this series, we will examine some of the financial impacts of this backlog on hospitals, and see what coping strategies are being employees.